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What Is Gildan Activewear Inc.'s (TSE:GIL) Share Price Doing?

Gildan Activewear Inc. (TSE:GIL), might not be a large cap stock, but it saw a decent share price growth in the teens level on the TSX over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Gildan Activewear’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Gildan Activewear

Is Gildan Activewear still cheap?

According to my valuation model, Gildan Activewear seems to be fairly priced at around 11% below my intrinsic value, which means if you buy Gildan Activewear today, you’d be paying a fair price for it. And if you believe the company’s true value is CA$57.72, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Gildan Activewear’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Gildan Activewear?

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -6.0% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Gildan Activewear. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Currently, GIL appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on GIL for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on GIL should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Gildan Activewear at this point in time. To that end, you should learn about the 2 warning signs we've spotted with Gildan Activewear (including 1 which is a bit unpleasant).

If you are no longer interested in Gildan Activewear, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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